International investing is tailor-made for night owls -- and the farther east the company, the better. Tomorrow -- or very late tonight, if you prefer -- we'll hear earnings news from two Korean companies: steelmaker Posco (NYSE:PKX) at 2 a.m., and world-leading LCD panel maker LG.Philips (NYSE:LPL) an hour and a half later. We'll look at Posco separately. For now, let's focus on LG.Philips.
What analysts say:
- Buy, sell, or waffle? Two dozen analysts track LG.Philips. Of these, half rate the stock a buy, nine say hold, and three counsel selling the stock.
- Revenues. Tomorrow's fiscal Q1 2006 earnings report has analysts predicting 46% sales growth to $2.91 billion.
- Earnings. Sales increase or no, just like this time last year, analysts are looking for LG.Philips to land in the red tomorrow. A loss of $0.02 per share is the consensus.
What management says:
In late March, LG.Philips updated investors on trends in its business -- two bad ones and one good. Bad news first: Both total shipments (by "area," or volume of panel inches sold) and price per square meter of goods shipped will decline sequentially against Q4 2005.
And the good news from LG.Philips: "The Company's EBITDA margin percentage is now expected to be in the mid-20s, an improvement over the previous guidance of a high-teens percentage." CFO Ron Wirahadiraksa further noted that "LCD TV sales remain strong" but that sales of other LCD products (which might include computer monitors and cellular telephone screens) were weak. However, between the strong sales of LCD TVs and the company's newest panel factory producing large-screen LCD panels at lower-than-expected costs, LG.Philips may be able to improve its recently weak margins.
LG.Philips' revenues grew 41% year over year in the fourth quarter of 2005, and 46% the quarter before that. Analysts expect to see another 46% tomorrow. Yet margins on those sales have been falling even faster: The company's gross margin contracted by two-thirds over the past 18 months. Operating and net margins are both down roughly 80%. As a result, the firm netted 68% less profit in 2005 ($567 million) than it did in 2004.
Margins % | 9/04 | 12/04 | 3/05 | 6/05 | 9/05 | 12/05 |
|---|---|---|---|---|---|---|
Gross | 31 | 25 | 15.6 | 6.9 | 6.7 | 10 |
Op. | 27.1 | 21.1 | 11.3 | 2.3 | 1.8 | 4.7 |
Net | 25.5 | 20.5 | 11.8 | 3.6 | 2.6 | 5.4 |
One Fool says:
Practically no quarter goes by without new "news" about the price of LCD TVs falling more quickly than anticipated. That trend is playing havoc with LG.Philips' margins (and the company is not alone in this). True, LG.Philips is able to move more product at these lower prices, and it's also true that consumers love this trend. But lately, few shareholders have been cheering.
Competitors:
- Sharp
- Samsung
- AU Optronics (NYSE:AUO)
Posco is aMotley Fool Income Investorpick.
Fool contributorRich Smithdoes not own shares of any company named above.
